According to the Australian Petroleum Production and Exploration Association (APPEA), the capacity of Australia to find and develop petroleum resources can be negatively affected by the petroleum resource rent tax (PRRT) review conducted by the Department of the Treasury.
In November last year, the government announced a review of the design and operation of the PRRT, associated Commonwealth royalties, and crude oil excise as oil export revenues declined. Basically, the review was aimed at showing the government the extent of the feasibility of the current tax system and ways to address the rapid decline of PRRT revenues.
However, APPEA CEO Malcolm Roberts pointed out that the review is not really necessary, considering that the country is already having a stable, competitive tax regime, which has been attracting billions of dollars worth of new gas projects for the country. He said:
“There is intense global competition for capital. Australia is just one of 21 countries exporting liquefied natural gas (LNG).
“Australia is not the most attractive destination for global investors. Our reserves are costly to develop, our corporate tax rate is higher than many competitors and we have high cost structures. Australia’s costs of supplying LNG to Japan are 30% higher than those of countries such as Canada.
“Without the natural advantages of countries such as Qatar, Australia has relied on stable policy settings to attract investors. Policy stability is vital for high-risk, long-life LNG projects – Australian projects typically take more than ten years to recover upfront capital costs and begin to make a profit.”
Roberts noted that investors should be confident that policies are stable, where there will be adequate returns to reward their commitment. He also warned that Roberts warned that retrospective policy changes could destroy confidence, which means a decline in investments in petroleum resources, exports, and jobs.
As of yet, the Treasury is expected to release its report to the government, along with its recommendations, this April.